Skip to main content

tv   Bloomberg Surveillance  Bloomberg  June 26, 2017 4:00am-7:01am EDT

4:00 am
♪ francine: italy deploys up to 17 billion euros. prime minister may delivers clarity, hoping to close a deal with the dup this week. loeb targets nestlé.
4:01 am
numbers from germany higher than atected, business confidence 115.1, estimated 114.5. global stocks advancing. nestlé is the one we are watching. it did spark a rally in european dan loeb looking at the company. the other one i'm looking out for is intesa. let's get straight to bloomberg first word news. the u.k. prime minister due to meet the leader of dup. also, theresa will publish details how she intends to protect european union nationals
4:02 am
living in britain. david davis has said that in said britain will fight any demands. are secretary of tate says qat will find it difficult to meet demands from of the rex tillerson said they could be a basis for talks. the list of demands includes shutting al jazeera, cutting back ties with iran, and ending turkey's military presence. pakistan, more than 150 killed after a tanker exploded. officials said dozens more are in critical condition. villagers had gathered to collect leaking fuel. the final round of election showed a resurgence in for former prime
4:03 am
minister silvio berlusconi. candidates showed backing and an independent candidate. they made significant setbacks for the ruling democratic party. spacex has launched its ninth rocket, topping last year's total. the lift off from vandenberg in california follows another launch on friday. it is caring 10 satellites for iridium communications. it is the first time spacex has sent two rockets into orbit in such a short time. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: thank you. italy has approved emergency ,ules for two ailing banks mobilizing as much as 17 billion euros. on friday, the european central
4:04 am
bank declared the lenders failing or likely to fail and said both would be wound up under italian solvency rules. is there a better alternative the pointdecree from of view is supporting families, the banks, the some favors, the stability of the financial system? i wish that people who criticize me would tell me what a better alternative could be, because frankly i don't see it. francine: for more, let's bring in our bloomberg managing editor for finance and head of multi-asset at royal asset management. thank you for joining us. break it down for us. this is a complex deal that was done last minute. >> it was. they have been working on this for quite some time. these are two banks that tried to go public just several years
4:05 am
ago. exploredvenues were unsuccessfully, including trying , so this is a 17 billion euros split. the good assets will be taken over by italy's second-largest bank. the bad assets will be slowly unwound. questions over the banking unit and the rules that were sidestepped to allow this intervention. francine: i have a chart that tells you the story for these two banks. these are nonperforming loans to total loan ratio for the two banks. the main controversy is around the eu rules and the role of this good bank?
4:06 am
>> that's right. the italian state is putting the banksaving deemed were not too big to fall under the european union rules, but were going to be dealt with under a tight insolvency law. -- under italian solvency law. the liquidity would have continued at a steep pace throughout the last few months. francine: how do you see all this? is this the beginning of the end because this could go badly or is this the beginning of a better place? thing is that this is a legacy issue from the banksial crisis, so these have been zombie banks for quite some time.
4:07 am
this is a way of winding them up. made ist that was just is set thatecedent state aid is not meant to be allowed, but the rules have been twisted here in order to allow italy to put this money forward something like 5 billion euros of state aid is and 12 billion euros of loan guarantees. managed to structure it in such a way that the senior bondholders have been protected, but the questions will be asked about whether this is a big country being treated differently from small countries. is it different because it is the moms and pops of this world? >> this is the backbone of the , thehier italian economy myriad of small and medium enterprises could have been
4:08 am
affected by a disorderly resolution, but it is not dissimilar to spain. santander was covering the capital gap that the state is now covering. francine: who are the winners and losers? >> the market is telling us that intesa is a winner. they're getting good assets for free. they are expanding their balance sheet and expanding into the region that is the backbone of the small and medium sized enterprises. francine: would you go back? it anyn't think there is .ajor impact on strategy what happens next?
4:09 am
>> the deal has the european union backing. there will be questions as to otheremains of the lenders in italy struggling with capital raising. francine: thank you so much. with surveillance. plenty coming up. deploys $3.5 billion in his biggest bet ever, shares jump. prime minister may will give theity, but will it move dial in negotiations? we will discuss that next. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.
4:10 am
4:11 am
4:12 am
francine: this is "bloomberg surveillance." takata has filed for bankruptcy protection in the u.s. and japan. the filing listed more than $10 billion in liabilities. a russian billionaires investment vehicle has reached a deal to buy one of the largest health food retailers in europe. .t will pay 1.8 billion pounds the payroll securities fraud trial is set to begin today. he came to public attention after raising the price of a life saving drug by 5000%.
4:13 am
he has been free on bail and has taken to social media to make strongly worded statements about members of congress that criticize his decision. that is the bloomberg business flash. francine: nestlé is in the 's thirdrs of dan loeb point. the fund in tens to encourage management to pursue change with a greater sense of urgency by selling its 23% stake in l'oreal. thank you for joining us. we do have a new management in charge. he has said he will pressure them, but give them enough time to do more? actionrly he wants some faster than new ceo of nestlé took over this year. he already signaled he was going
4:14 am
to move to change the company. he is a new ceo who comes to nestlé from the health care industry, so clearly there is a shift. why are european food companies targeted at the moment? they have lacked in performance and have not rewarded shareholders as much as shareholders would like them to. fended off a hostile bid from kraft heinz not too long ago, then moved to improve shareholder return and would put some underperforming businesses up for sale. francine: this is nestlé stock. compared tog at 11% peers, 4%, over the past two years. we calculated it on a blended ford price-to-earnings.
4:15 am
do you own any? >> in terms of food companies and defensive generally come they are quite high multiples relative the market. this is nestlé versus its own sector. element tod proxy the ownership we have of these sectors. what is interesting is the last 12 months or so has seen strong inflation rising bond yields, which has been a challenge to the sectors. the tailwind is picking up and you could find multiples go up as bond yields go down. francine: what can they do to defend themselves? >> they can review their portfolios. nestlé has gone about that with mark schneider. unilever is doing that more aggressively. they can do buybacks and other things to boost returns. spread's or the confectionery business up for sale. that may be the best response.
4:16 am
youcine: trevor, how do view the fact there is an activist investor now? can you say the industry in the europe will be targeted by activist investors and what does it mean for shareholders? in thenot involved analysis of individual battles, but you are starting to see capital being deployed to unlock value. if you look at the relative performance of european stocks versus u.s. stocks, it has been a disaster story for the last 30-40 years, plus the fact the european economy is doing better. many people are thinking maybe that will unlock value. francine: why have these companies been such poor performers? >> part of it is the european economy. part of it is the fact that consumers are turning away from big food in some areas, this
4:17 am
sugary, salty food, and so there is a big challenge for these companies that have legacy products in their portfolios. moving to get healthier and slimmed-down, but it is a long process with these brands they have invested in over the years to keep them performing. francine: they are kind of emerging-market companies, aren't they? they so much -- sell so much to the emerging markets? >> that's true. there is quite a significant emerging market exposure there. an ideal environment would be rolling bond yields, rising commodity prices, a bit of dollar weakness. we have had some of those things over the past few years. there are individual companies not keeping up. francine: european companies, you like them better? >> we do. the political story was the big
4:18 am
thing this year, and the u.k. has negotiated that. there are lots of reasons why people are moving in. also, the european economy tends to like the rest of the world. europe is playing catch-up. we don't believe it will be a permanent outperformance. and china slow down, europe will cool off as well. we believe that will happen next year. francine: gdp or they can't stabilize the economy? look at chinese business confidence, it has been dropping. chinese interest rates have been rising. once we get the party congress out of the way, you will get more focus again on reform and monetary tightening, so i think we have had 12 months that you can look at as pump priming. after that, we get back to a
4:19 am
slowed down china where bonds can do quite well, but stocks will have a few challenges. francine: interesting. thank you so much. up next, central banks in focus. mario draghi speaks in portugal today. we will have the details next. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.
4:20 am
4:21 am
4:22 am
4:23 am
inncine: i francine lacqua london. mario draghi will speak in portugal later today. john williams has made the case for more interest rate rises. he said he expects inflation to rise to the 2% target next year as unemployment edges lower. viewsmments suggest his are in line with those of janet yellen. when you look at central banks and we talk about balance sheets in the second, but if you are a fed washer, you have to take simple bets you believe the economy is strong or the labor market is strong enough to push ,nd collation up automatically is that right? >> yes.
4:24 am
the economy is growing strong enough for the unemployment rate to drop. in 2008-2009, but wage growth is very muted, so 2% -two .5% wage growth, where as it was double that level in 2007. you are seeing muted wage growth , and central banks have to make a call as to whether something has changed. yellen seems to be on the side that says we need to reload and raise it interest rates. is no compelling evidence they need to raise rates rapidly. if global inflation starts to ebb, you may find some of this pressure goes away for a while. francine: what are they worried about? they don't have enough ammunition when the next crisis
4:25 am
hits? >> wage inflation kicking in and becoming a trend. phillips curve argument that no unemployment creates wage inflation, but it is a process that can take quite a long time, so i think the fed is worried that interest rates are too low and they have left nolate, but there are still signs of late cycle excesses in the labor market that would say they need to be in a hurry about it. francine: what do you worry about the most in terms of balance sheets? , the ecb inboj yellow. >> the japanese are doing something quite special here. they are trying to create inflation and going through an experiment of pushing harder and harder until they get inflation to come through. market, they have part-time workers, lots of structural changes, which means
4:26 am
wages are not picking up the way they would like to see. on the other side, we are wanting wage inflation to pick up because they are trying to get nominal growth to a level so that they can erode government debt. it makes a lot of sense, but it is a high-stakes game. francine: thank you so much. next, the brexit battle as theresa may lace out her plans for eu citizens as david davis says he is ready to fight over the role of the european courts. plenty of details next. we would do that next. this is bloomberg. ♪
4:27 am
4:28 am
4:29 am
france's you are watching "bloomberg surveillance." let's get to first word news. the u.s. secretary of state
4:30 am
has said qatar will find it hard theeet the demands to end crisis p rex tillerson said they could be a basis for talks. the list of demands includes shutting the al jazeera network and ending turkey's military network in the process. than 150 people have been killed after a take or exploded. dozens more are condition. leakinged to collect fuel after a tanker overturned. firefighters are battling blazes utah.ifornia and in southern california, a wild fire out after a car crashed. officials said better weather conditions have limited the growth of a wildfire may utah. in utah.re
4:31 am
in support for silvio berlusconi. an independent candidate is --.d in its ninth launched rocket of the year. follows another launch from friday. the craft is carrying 10 iridiumes for communication. it is the first time they have sent two rockets into orbit in such a short period. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries around the world. this is bloomberg. theresa may will give her plans for the use of --
4:32 am
people living in the u.k.. further talkshold with arlene foster this morning. for more on this, we are joined by simon kennedy and jonathan portis. greentham.r thank you for joining us. it is a 15 page document. >> it will pad out what her willsal on friday -- david push back their demands. he calls it the fight going
4:33 am
forward. out there be readers wanting to know with these rights are, how far she is willing to go. of can read this as a test how she wants these talks to be. francine: how hard does she want these talks to be? it was one of her original red lines, not just on this one, but on a range of issues. the eu proposals would say that. the british proposals will not. that is going to be an issue. the second sticking point is the , they would ensure citizens kept their existing
4:34 am
rights. would take some of those rights away from them. >> they care about a few things, the border and the hardness between the border between the two islands. she needs to be on board by thursday. the dup leverage. francine: we have the you deal, how would this play out? >> euro pound, primarily. cable, you have the big swings in the u.s. dollar, which pollute the
4:35 am
picture a little bit. scenarios atave this stage. cane are lots of ways it break up. there will be done to know where people may think there will be a breakdown in talks. there will be moments where it sells off. alternatives. one as we move in the single mpset, which is what most in the labour and conservative party want despite their leadership. in that case, the pound ought to strengthen. lifted allakness votes and gave people strong returns last year. the pound is quite strong. asset returns end up being quite
4:36 am
weak. strong or weak is theresa may at the moment? it is unclear what her tone and language suggested last week. she is weaker than she was before the election. what that means for the talks is unclear. we are in a position where she may want to make those compromises, but eu leaders may say we are not sure you have the political strength to deliver this. why should we make the compromises? that is what worried me that theresa may's weakness means it will be more difficult for her to make the concessions she needs to make a decent deal.
4:37 am
francine: is she going to go soon or is impossible to tell? >> it looks like she will hold on for a while. the potential leadership candidates, there is a comic about it. they probably want some stability. of blood, if a hint were in the water, the sharks would calm. the tories are known for taking the labour party don't to kill off the leader if they see their own future is in peril. does she need a soft brexit to stay in power? we don't know what the bounceback -- you could argue -- there is a majority in parliament for making the
4:38 am
compromises needed for a softer brexit. on the other hand, she may be held hostage to the hardline who doon the brexit wing not want to see compromise on , such as the role of the european court of justice. >> we also have the five-year fixed on parliament act. limpe on in this. it will be messy for quite a few years. francine: what does this mean for the boe? the probability of a u.k. hike y the bank of england. >> i find it hard they will hike with this political difficulty in the background. october, you get
4:39 am
past october, inflation starts to come down. find it hard they would hike. markets don't really buy that. worryne: how much do you about the u.k. consumer? wage growth is falling like this and inflation going the other side. >> i would be worried. we have had a strong period since the referendum. consumer confidence held up after the referendum. the medium to long-term implications are sinking into business at the time consumers suffer the hit from inflation. are doing well because of sterling weakness and the eurozone doing better than a year ago. i would still be worried about
4:40 am
the domestic u.k. economy. francine: thank you for joining us. up next, we check in on the markets. a positive day of trading in europe. this is bloomberg. ♪
4:41 am
4:42 am
francine: this is "bloomberg surveillance. mark: the nato banker trumping centsmping above 100 s
4:43 am
today. under local law rather than eu law, the decision sparing senior bondholders. they suffered losses, of course. good assets for one euro. that is the big banking deal. lenders. the two -- as troy 1%. in perspective, the mpl, the total ratio, it is 18%. italy has a nonperforming low. nestle is the big story today. amassing a $3 billion stake in
4:44 am
nestle, targeting in its -- encouraging nestle to sell its stake in l'oreal. it puts a spotlight on the chief executive, arch schnider. the stock price lagging behind other consumer giants in recent years. unilever. line, year yield is going to go to 2%. it is at 1% now. francine: thank you. italy has approved rules for two , mobilizing as much as 17 billion euros to liquidate lenders. both would wind up under italian insolvency rules. jonathan portes.
4:45 am
for joining us, chris. what does this tell us about how lenient the commission and eu are when it comes to bailing in and what does it mean for italian banks? the bail and malls makes sense. everyone agrees it is a way to go forward. you have to get to a starting point before you can apply those across the marketplace. there are problems around seeing is --olders and the eu where they can say from now on, it is mailings and this is what we will see. francine: what surprised you? >> there has not been a carve
4:46 am
out. perhaps that is surprising. the bottom line is, think about went took over bear stearns and washington mutual. it was finding someone who could do it. francine: this goes back to the .eed for banking union there is little appetite for across the board. banking rescues have to take into account local politics and local conditions. this one clearly does. not smooth or straight. this does not necessarily reflect a permanent step back. the object is in brussels and frankfurt is we are going to get there. francine: do you think we are
4:47 am
going to get there? >> it is like looking at where we are in brexit at the moment. closer.etting there is an appetite for it. there is an issue around different practices in different countries. one of the problems we talked about was italy policy -- italy's laws. it is whether anyone balks at those issues. francine: this looks like a different deal to what we had about 10 days ago. capital, they bought a bad bank. what does this tell you about the deal with the banks? you have to treat everything domestically? >> domestic politics dictates the fact that they were not willing to bail in the senior
4:48 am
bondholders. thestic politics dictate fact all in the good loans went to -- and the bad loans have been split off. that is not as clean as one would like it. slowly and painfully, working through the legacy of a dysfunctional banking system. i do not think that would mean they would get here in the end. francine: you are saying we are over the italian bank hurdle or is it too soon to call it victory? who is next? genoa-based bank. there is a lot of work to do. keeps hoping we get to that point. look at spain. are -- popularel
4:49 am
was one of the best banks. francine: do you look at the german lenders to see --? >> i don't think german lenders are as spot as the italians are. the italian market -- the german market can do with a good shakeup. that has more political issues because of the strength of the regions. the key thing for the central bank is they want to move to the situation where bailing's are the norm. this is one more step towards getting there. i heard one commentator saying it is about making the voters
4:50 am
happy, but there are pensions in those senior bonds. francine: thank you. only have a headline crossing the terminal. the u.k. government and the e dup will agree on a deal by lunchtime today. is something we need to keep an eye on. it may move euro-dollar a touch. this is what we are looking at. global stocks advancing. nestle is up. this is bloomberg. ♪
4:51 am
4:52 am
4:53 am
s iscine: jonathan porte with us. we had the headline breaking on the bbc, saying the u.k. government and the dup deal is
4:54 am
expected by lunchtime. what are you looking at? jonathan: the main element of the deal will be money. is, what does it mean for the rest of the u.k.? the amount money going to northern ireland will not be that much. more money for scotland and wales. either give scotland more money, which will have an impact on public finances, or tell scottish conservatives, you have a deal that gives ireland more money, but not a deal for scotland. backbenchers there she wants to keep happy? treasury is worried for
4:55 am
the potential this deal has to unpick the consensus for austerity across the conservative party as a whole. not ahundred million is big deal. if this means the treasury finds and -- inlt to reduce england. it is going to be tough. francine: do you think the a vote one was also anti-austerity and how does that change the composition? a significant part of the vote was anti-austerity. it was not the only thing, but in a lot of the economically part of northern areas, it was a general feeling we have been left behind. france, thed in
4:56 am
vote went in four different directions. we want to try to reboot a division in europe, which is won with.n francine: thank you for joining us. surveillance" continues in the next hour. we will be talking with rupert harrison. this is bloomberg. ♪
4:57 am
4:58 am
4:59 am
francine: a rome to the rescue.
5:00 am
italy shores up two venetian banks. brexit barter prime minister may hopes to close a deal with the dup this week. good morning. this is "bloomberg surveillance." tom, happy monday. it is interesting. we have politics, activism, and brexit. news flow this morning. getting wound up in washington for the health care bill vote. week. see that later this it looks like it will be an eventful week. francine: it will. first, let's get to first word news. italy has carried out its
5:01 am
biggest bank rescue. will spend as much as $19 million to shore up two banks. theresa may outlines her plans for safeguarding the plans for eu citizens living in the u.k.. david davis says the government will fight any demand eu courts should have power in the u.k.. u.s., mitch mcconnell faces the risk of an embarrassing defeat over the obamacare bill. at least five republican bigtors are demanding changes to the legislation. he cannot afford to lose more than two votes. trump will highlight the growing
5:02 am
energy dominance this week. he will discuss the opportunity to sell more coal to europe and asia. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries around the world. this is bloomberg. tom: let's focus on europe. with oil with a bounce american oil. a little bit of steepness now. quietea of the vix, a vix. my chart will be on that. dollar peso, a stronger mexican peso. francine: i am looking at stocks. a tiny rally in europe.
5:03 am
climbing for a third straight session. tom: let me go here. i have not done this in a wild. this is a fitted moving average. the vix going back 25 years. what is interesting within the quiet, here is the record quiet within the 1990's. the further excitement here, the financial crisis. trend down where we are below where we were in the 90's.
5:04 am
francine: this is a simple chart. for our radio listeners, we will push these out on social media. shows you the nonperforming loans are massive. if you have a chart like this, it shows you banks are not sustainable. investors are trying to figure out how this is cobbled together. if you have a better solution, he has been telling reporters they should have let him know earlier. the u.k., looking for solutions. theresa may giving details of her strategy.
5:05 am
15 pages of details will be published alongside the announcement ahead of this, may is expected to meet with arlene foster. now, rupert harrison. great to have your insight into what is going on in u.k. politics. >> the uncertainty last in the u.k. parliament. we are into this phase in the negotiations where it is a normal negotiation. you have a proposal and noises about how it is not enough, but it is in the right range. these look like
5:06 am
normal negotiations. the government has to push through eight brexit bills. that is where the uncertainty lies, are we going to get to a point in 18 months time? don't have the legislation to do brexit. francine: is the tone harsher than we thought? does it mean we heard from david davis, it will be a tough three months of negotiation? >> you always hear it is going to be tough. i thought this was a generous offer. where there is flexibility on fairlydes, this is positive. the issue is in parliament.
5:07 am
tom: how much does the parliament support prime minister may right now? >> it looks like she will have a formal majority. theresa may will remain prime minister for as long as they want her to remain prime minister. when it comes to individual votes, in the house of commons, you only need a few rebels to .verturn specific votes this repeal bill will take vast number of regulations and put them into law. each one could be a flashpoint. you have the house of lords, which feels emboldened by the election result. they can make life more difficult.
5:08 am
tom: these cells buried convention, if you have a hung parliament -- gets involved. it is a big deal. >> the convention says if somebody has something in its manifesto, the lords can ask the house of commons to think again. was dependent on a government winning a majority in the elections. the house of lords feels emboldened they have not won a majority. the end, this increases the tail risks in both directions. get an accidental brexit where you don't have legislation end upe, or you could with a government forced to part the u.k. because the alternative is so disruptive.
5:09 am
francine: what they want is money and investments. this is something you were telling me a day after the snap elections. where does this lead the government to give money to the rest? >> you are going to get lots of clever ways the treasury will try to get money to northern ireland in a way that does not imply money going to scotland and wales through one offs, corporation tax. that is probably what is taking time to get sorted. the treasury does not want to 2 -- in northern ireland. francine: thank you. the two -- we
5:10 am
speak about the two venetian banks. this is bloomberg. ♪
5:11 am
5:12 am
investor dan loeb is making his biggest bet ever. his hedge phone -- hedge fund has taken a stock and nestle. growthar, nestle's cell
5:13 am
fell to the lowest pace in at least a decade. has filed for bankruptcy protection. they folded under liability for millions every called airbags linked to more than one dozen deaths. a russian man has offered to buy holland then bear it. the chain is owned by carlyle group. francine: italy will commit as much as 17 billion euros to clean up two banks in its region. the state was given permission to wind down two banks with state money on friday.
5:14 am
shares are trading higher this morning. partner ate founding an investment group. on with us, rupert harrison. david, thank you for joining us. the deal seems to because of together quickly. >> what is important to bring to context, the average european to utilize about 8% of gdp shore its banking system. much higher in the u.k.. italy and france used zero. bank,will pay for the about 1% of gdp, nothing theared to the 8% in european average. much higher elsewhere. the is happening here,
5:15 am
is a 1% cost to the taxpayer, but as i said, you stop mentioning italian banking crisis. we should have done this five or six years ago. they should have acted before. one bank acquired their loans. the italian banks get all of the ugly stuff. how do you view the banking union? is it dead in the water. >> popolare, in terms of
5:16 am
capacity of making earnings, with some bad loans. real estate is rising in spain. in the case of the other, you , they areranchises losing money. the situation is different. the banking union is not dead in the water, it is a work in process. italy committed about 60 billion euros through the esm to shore up the banking industry in ireland, spain, portugal and greece and has used zero in theirs. it is coming to any and d thanks to the ecb. tom: the banking union may be
5:17 am
can survive. analysis, it is about a 103 billion equivalent to the united states. gdp, 6/10all part of of a percent, which is under 1%. aren't there a number of banks behind these transactions? ofthe concentration nonperforming loans is in four banks. taxpayerll cost to the as approved by the commission will end up being 1% of gdp. you can say -- why italy has not done it in 2011, 2009, 2 this is 10, 2011, 2012, a very fair question. i don't have an answer. it makes no sense. we should have done it then.
5:18 am
pretend.nd and the bill is higher than it would have been. bottom line, 1% of gdp. in the big scheme of things, there are more important issues than 1% of gdp. you have theff and stronger system. the number two banks are investable, strong, profitable, very well-funded. francine: was this the best deal the italian government can do? >> it is best for short-term. regulator and resolution mechanism were meant to be no more bailouts. issues and resolution issues are political. we have had senior bondholders protected.
5:19 am
long-term, this is this is a nee for further integration in the eurozone. you think -- why do i want to going tod if rules are get stretched. that is the longer-term impact. tom: thank you so much. other guest coming up. rupert harrison with us, as well. we will continue. much to talk about. a discussion on the american economy. william lee will join us. from london and new york, this is bloomberg. ♪
5:20 am
5:21 am
5:22 am
5:23 am
we have data showing german business confidence servers to a record high in june. this comes after they increased the cost for germany. joining us now, -- is still on set with us, rupert harrison. how do you explain the euphoria
5:24 am
in confidence for german businesses? >> conditions have been good for some time. interest rates continue to be low. there are forces pushing the domestic demand. the export side is relatively new. is explainingn this record high in the index. like all votes rising. it seems to be optimistic. has the german economy reached escape velocity? >> this is optimistic. we are not yet in a situation where there is a true boom.
5:25 am
what is missing is increasing prices.d otherwise, it is strong. francine: will a stronger euro hurt sentiment? again.that >> will a stronger euro hurt sentiment in germany significantly? i do not think so. the euro would have to be stronger to have an impact on the euro export industry. it does not change so much. are notxports price-sensitive. 4% wouldse of 2%, 3%, not matter much. francine: thank you. rupert: data is strong.
5:26 am
we have had a runner of strong data from europe. key risk is nominal income growth. there is a vulnerability as we have this tailwind from lower prices. whether there is a vulnerability in the absence of higher wages and higher nominal income growth. flash pmi's come out. francine: we are looking at live pictures of downing street where theresa may is meeting the dup leader. ♪
5:27 am
5:28 am
so new touch screens... and biometrics. in 574 branches. all done by... yesterday. ♪ ♪ banks aren't just undergoing a face lift. they're undergoing a transformation. a data fueled, security driven shift in applications and customer experience. which is why comcast business delivers consistent network performance and speed
5:29 am
across all your locations. hello, mr. deets. every branch running like headquarters. that's how you outmaneuver. tthat's why at comcast,t to be connected 24/7. we're always working to make our services more reliable. with technology that can update itself. and advanced fiber network infrastructure. new, more reliable equipment for your home. and a new culture built around customer service. it all adds up to our most reliable network ever. one that keeps you connected to what matters most. tom: "surveillance" right now for your monday briefing, your news, here's emma. emma: india's prime minister
5:30 am
ets president trump at the white house today. the visit will allow the two leaders to build a personal people expect a breakthrough on issues such as immigration. the prime minister is likely to vetoes e president on for technology workers. n pakistan, the death toll has risen to 157 in a fuel truck fires. to the scene ed when the truck crashed. they were collecting the spilled fuel when the wreck engulfing people in flames. u.s. secretary of state rex some son is criticizing demands sued sandrabe its allies are making of qatar. tillerson says they would be and ifficult to meet urged the country to start negotiating. the saudi-led bloc has told down al-jazeera tv network and contact with islamic groups such as the and remove erhood turkish groups from the country. and federal reserve policymaker john williams is making the of further gradual interest rate hikes. in sydney, the san francisco expects dent said he inflation to rise to the 2% arget next year, and the fed's
5:31 am
intention to stop reducing its bond holings. >> the goal here is really just very gradually, ease ff the kind of still husband to the economy, keep it growing a little bit above trend, but it go too far and try to get normalization interest from elp, keep that going too fast. officials have argued for a hike to see if inflation is actually heading higher. day, news 24 hours a powered by more than 2700 journalists and analysts in 120 countries. i'm emma chandra, this is bloomberg. tom, francine? thank you so much. back in april 2016, the founder yo company, for example, was one of the but people that a f the impact vote for britain to leave the e.u. would have on both their prospects of the future startups. yesterday the brexit secretary
5:32 am
he will pretty sure be able to get a free trade deal with the e.u. in ing us now on set here london is simon, yo company founder, and rupert harrison is with us. always a pleasure to speak with you. what do you make of this ssible free trade with the .u.? simon: what's interesting is we're about to send a bunch of lawyers in to do the negotiation, and i wonder how actually going to work out. my experience in negotiation is hat you have to have a top-line vision, and what's people have a top-line vision, you can do something. doing is em to be trying to sort the finesse details out the next two years no vision. i've always had a negotiation of two things. one, you have to have a meeting the top about how the new britain could interact th europe and actually bring something to europe and be the hong kong of europe or whatever it is we want to do. secondly, to have an exit plan if you like.
5:33 am
the back all it alternative to a negotiated agreement. if it doesn't work out, this is going to do. francine: but first of all, on the vision, who should you look vision? theresa may didn't do very well in the election. who does she listen to? a pity, isn't it? we live in a political system where we kick the hell out of and f our politicians, then ask them to sort of, you know, to lead the way. actually, i think theresa may is a very capable person, and i ink she's had, you know, she's made a few mistakes in the last few weeks, and perhaps power to keep he on going with it. but yes, we need somebody. i think the mack ron thing is very interesting. you know, there's a young guy, ather like us. there's a lot of dvent words in business for businessmen, and , the area i eneurs come from. french people said over the eekend, what's the move with macron? there's a whole country behind him.
5:34 am
could you imagine if we were behind our leaders? saying earlier we need leaders who are authentic. we, the people, also need to be to d the people, trying support people. we have businesses where you y to, you know, knock your leaders down, we're not going to get very far. brexit look like? if we get the perfect brexit operator, a business what's the best outcome, the est yo brexit? simon: my entrepreneurial friends and i, you know, we're business. with i suppose if you're a car manufacturer and you're heading t with the thought of paying 10% tax on your exports into europe, maybe that's a bit different. to us, what are we paying, %, 3% difference in tax? that could be affected by the value of the pound. doesn't make a lot of difference. is normal for all of us, and we're out there looking for new markets in the rest of
5:35 am
in orld, as well as europe. i think probably the most mportant thing for us, certainly in the restaurant business, or the hospitality talent., is we have so we have a free flow of talent, the best people in the orld who want to come over here. london is a fantastic place to live, so people are very attracted to living in london. that's a big plus for us, so we should attract talent. tom: line up seven random of ervative members parliament, and they have a cup of coffee with mr. woodroffe. about the politics of all it all for the politicians? does anybody care about yo this yo that? >> i think if you actually took nservative befrpbls, most of them would agree with simon in private, but they might find it difficult to say so in public. that's the difference between the kind of business negotiation, where you can do and this in private negotiation, where the biggest problem is the people at the top do probably know what the
5:36 am
up is roughly going to end looking like. it's just very, very difficult to communicate that to your constituencies back home, so you have to kind of go through some of the theater in there. get i think what's very interesting, sigh machine's confidence of getting on with the job is actually reflected u.k. data. the we're very focused on the uncertainty. but if you look at business investment intentions in the thee bounced back a long way since the referendum, and a lot of use, for sectors now, the uncertainty is actually not that great. they know they're not going to be in the market. not going to re be in the customs union, and unless you're particularly affected, particularly some of services or those integrated supply chains in autos, it is basically business as usual. so i think some of the economic pessimism is a little bit overdone, and i think we have some of the theater when it comes to how protracted these negotiations eem. francine: are you pessimistic about the future? is it on inflation? pointing to some of the business indicators. uld they actually fall off a
5:37 am
cliff, or is it more nuanced? simon: of course i'm optimistic. glass half full, as most entrepreneurs are. you know, we have an enormous in this country especially of being entrepreneurial. if you go back to the 18th century, we go right out and things. right up into the 1960's, we've always reinvent ourselves. we're very clever. i always said of brexit, and i did vote to stay in, but i've going to be 's fine either way. it's just going to work out. certainly for all of us. big business thing is a different thing, and that in ously does affect people the economy. but in our world, as i say, i'm always optimistic. i think we heard the purse of creativity in this country. on ine if somebody landed earth and said words, and they said somebody in the top right of the atlantic, you know, wee got it, and all we have to do is sort of let
5:38 am
to be it.free rupert: i agree, basically this will be ok, we will probably a deal, life will go on. i think some of the gloom is overdone, but at the same time, price. a you know, there is definitely going to be a drag on investment. there will be a price to pay on inancial services. there will be some price to pay n terms of talent. rancine: but inflation, right? it's short term, and the bank of england has said they'll it could gh it, but become ugly inflation if there re tariffs or not? rupert: if there are tariffs, yeah, you could get a further impact. expect to see large-scale tariffs, particularly on goods. not a good outcome for anyone. you have to believe in this negotiation that it can at bad outcomes. francine: tom? ok, very quick last word, we
5:39 am
ot mixed up in our communications. how do you see london changing over brexit? simon: i see enormous change ahead. macron is a big indicator. that i think digital politics will happen in the next few years. voting online. if you hang around politicians, what they always say is what's he temperature of the company, what's the people want? don't want to put my faith in one party. i want an actual individual. speaking simon is about politics, and you can see the prime minister, theresa may, live from downing street, with arlene ands foster, as they continue with their negotiations. expecting something the today. i think they're going to talk hour half.out an tom: did you medicate rupert? francine: yeah, he's here. on.'s why we have him insight on what
5:40 am
they should offer. thank you so much, simon, yo company founder, and rupert harrison, portfolio manager ins stays with us. coming up, a conversation with j&j chairman and c.e.o. that's coming up at 7:30 a.m. in w york, 12:30 p.m. london. they'll talk about inflation. this is bloomberg. ♪
5:41 am
5:42 am
francine: bloomberg "surveillance" with francine and tom from london and new ork. nestle shares jumping this morning after a investor billion stake in the group through his third point hedge fund. it now owns about 40 million europe's biggest company. that's according to an investor letter released on sunday. the nestle position adds a loeb, better
5:43 am
known for his campaigns in the u.s. and japan. joining to us discuss this, fanner, team ic leader for european consumer news, still with us rupert multiasset ckrock strategies porlte manager. eric, thank you so much for joining us. irst of all, we have new management in place at nestle. do we know if dan loeb will act them time to get their in order and to continue with what they've announced? get i'm guessing he'll time, but want quick action as well. this is a company that has loeb standards. he wants the new c.e.o., mark hneider, has already announced he's going to do some things, like possibly sell the u.s. confection air business, step to what loeb wants, but he's probably going to want more. this is the nestle premium. nestle stock is trading at an 11% premium versus peers. the yellow line is the average 4% premium. his is over the past two years, but on the blended forward price to earnings basis. we will push this out for radio right now.
5:44 am
eric, why have a lot of these companies actually underperformed when you look at companies?n food eric: these are big companies with a lot of legacy businesses. things businesses in like chocolate, sweets that consumers want healthier lifestyles. companies that have a sort of brand providence, a story behind hem. they're a little bit cynical about big food t. has a tough to hoe. tom: eric, i look at this deal, nd it's really fascinating it's a low single-digit revenue grower. i get it. there's nice margins down below. it's done 10%, 9% per year for the last 10 or 20 years. well run, etty ginormous company. what's a guy with a 1.3% exposure going to do? mr. loeb's leverage other than to get on the a craft carrier and be little guy out there on the ircraft carrier?
5:45 am
eric: one thing he specifically wants is a sale of the stake that nestle has in l'oreal. stake, and kind of a chain reaction issue with other stakes that french have kind of wound up in each other. that would be one very specific that could go a long way toward appeasing what loeb wants. nestle is a pretty well run company for a company that size. tom: i find this extraordinary. basically a en 30-year workout, like unilever, being ng down companies, less euro in that. mr. loeb even gives their management credit for being euro, being less swiss, etc. where does he want to be in six if the ith this stock chart's straight line up as years? n for 10 eric: i think there's probably n element of opportunism here, too. he's looking at what's happened nestle's big rival, and look, they fended ff kraft hines there, but then
5:46 am
they took some measures to booth returns. they put the slow-growing up for sale. ss maybe there's an opportunity for something similar with nestle. eric, not everyone wants to buy kale juice. sure you, tom and i are more for the chocolate bar instead of the kale juice and health stuff. rupert, what do you make of his? does it mean we're going to have more activist investors in europe? harder make your life or easier? rupert: i think it's a positive gn for some of these companies to improve margins and returns. i should share some of the skepticism that i thought was out of tom's question over how much of a big deal this is. ese are quite familiar issues, the l'oreal issue, the margin issue. it's a positive sign of the margin for this kind of continues ory, which to run. francine: are we going to have more activist investors in it depend -- what does it actually depend on, valuations, or is it mpossible to tell? rupert: i think it depends on specific opportunities, where people see opportunity.
5:47 am
gradually see more of this, and that's a good thing. francine: thank you so much, eric and rupert. rupert stays with us. this is a picture for tv. a bloomberg user, and we hope you are, you can sign and ask rupert a question by clicking on here, ask the guest a question. u can also steal some of tom's cool charts. this is my nestle premium chart. this is bloomberg. ♪te note
5:48 am
5:49 am
5:50 am
emma: this is "surveillance." deutsche bank excluded u.b.s. underwrirlte of its recent $9 billion rights issue. e reason, according to the "financial times," deutsche bank says that u.b.s. is trying issues to inancial hire away senior bankers. there's no comment from either f the banks. rio tinto is banking australia's improved offer for its coal assets. raised its bid to almost $2.7 billion in an attempt to by ff the challenge yancoal. rio tinto says there's greater certainty the deal will be approved. tom, francine? tom: fran cry, i guess you've
5:51 am
got some headlines, right? yeah, we do have headlines on nestle. this is according to a pokesman, saying the company is having open dialogue with all shareholders, so they're ot talking about dan loeb in specific. they say nestle remains committed to a strategy and to the long-term shareholder value. that's all i have for the moment, but certainly the first time we heard nestle actually fact that dan he loeb is in the company now. updated if we have anything else. tom: i thought he was really good on that moments ago, talking about the great total revenue ven though growth has been subpar compared have group other of the food competitors. rupert harrison with us. he's from blackrock. bring up the transatlantic divide chart. it's a real simple chart. the five year out, five-year view of their inflation. and s. has it going down rolling over. grand granted, it's rolling over in the united kingdom, but gap here in inflation
5:52 am
outcomes. where's the opportunity in this? i think the opportunity is staring you in the face, which is to kind of -- those two are going to come together some point. i think the u.s. has been the really interesting thing. in arket now is pricing some big deflationary signals, downside s now, surprises. you've got oil, which i think is now testing the bottom of his new range. my incollision asian is if you believe in economic momentum, a ight labor market is eventually going to lead to pressure, you want to fade those moves. so there is opportunity on the break evens.s. also, the market is pretty long u.s. treasuries now. a change from a few months go, so potentially scope for a reversal. tom: where do you fit in on friday that he really cares p.m.i.'s and the efo institute is, frankly, the pmi's?of all do you care about behavior or litmus tests of manufacturing nthusiasm?
5:53 am
rupert: absolutely. that stuff has been very -- the that drove cators markets on the way up. i think the fading of the some of the to deflation, kind of reflation theme now. i think the important thing is any sign of things really rolling over. your central case has got to be now. the european, japanese, u.s. economies look like they've got decent momentum. of ssue, the change pricing recently has all been about inflation. goldilocks is at going to continue? do you think the inflation is going to come back? r do you actually want to look through this and play for the renewal of inflation? i think that's probably where most of the opportunities are. do you expect inflation to go? this is a chart which basically the fed chair and what they've done with inflation, again, for our radio listeners, e will push it out on social media? just very clear, this feels different. this is kind of a medium time.e each this is janet yellen. rupert: that's what the you year inflation is, and see right the end of that
5:54 am
chart, this collapse in the u.s. because inflation has always presented the year number, that's going to be march ll february or next year. so we're going to have very low prints. you're going to have headline continuing to decline. and then you're going to have this big jump up, and if you're reserve, the federal you're looking through that and thinking, ok, if we step orward a year to the middle of next year, we're going to have c.p.i. well above two. p.c. creeping back up. what's given them the confidence to carry around tightening, and i think for you t participants, again, probably to want look through the recent weakness. francine: what's your top buy right now? rupert: i think u.s. break even, i think the one flashing is the oil price, which is testing in the short term, the bomb only of this range. if we get stability there, i think the u.s. is the wrong price. go within all this, let me back to politics and your wisdom on the conservative party. may s prime minister going to be seven days from
5:55 am
now? rupert: actually where she is now. she is hostage now to a conservative party that sees kind of the dam holding back chaos. they do not want another election, because you've got corbin's ratings in the short term very high. lose an rvatives could election. you've also got a party that can't really agree on who it leader. be the next tom: exactly. rupert: the plurality who don't majority want boris johnson or david front-runners. i think it's in everyone's interest to allow more time, maybe someone else to emerge. feeling that a brexit has turned into this political -- kind of kills maybe it touches, and just let them do brecksity and get a fresh face the next had a. after tom: may i suggest harrison on the shortlist? rupert: well, there are a procedural issues, because i'm want a member of parliament. other than that, i'm very flattered. tom: very good. thank you so much for being
5:56 am
with us today. . harrison holds a shingle out of blackrock on their multiasset strategy. e really enjoy rupert. he has a lot of value on this link annal of politics into what we do every day. we're going to drive that conversation forward. us, william lee, you group. from citi bill lee on the international u.s. economy. he i'm going to show g.d.p. chart g.d.p. rolling over for the second quarter. it's going to be a good hour. at italian ooking banking as well. he yankees, they need some pitching. this is bloomberg. ♪
5:57 am
5:58 am
5:59 am
tom: this morning, any talks of european banking union, they are over. it's good bank, bad bank, and e ultimate political
6:00 am
cross-examinedown, as italian taxpayers will write a check euros.lions of in the united states, the senate may vote on mcconnell sometime this week. moderate and conservative republicans, they are in ntensive care. the state of the american economy, in this hour, william lee of the milken institute. everyone. g, this is "bloomberg surveillance," live from our world headquarters in new york. i'm tom keene. in a most busy london, francine lacqua. saw the doorstop with the prime minister of the united kingdom and somebody from northern ireland. e they going to come to an agreement? francine: we think they will probably come to an agreement. at was the leader of the d.u.p. we are expecting some kind of agreement on this conference. to still find ed out what exactly the d.u.p. want in return, if it's anything more than hard cash their region. tom: most interesting. italian banking, we'll do in a moment. now, with news, here's emma chandra. emma: thank you, tom. ty lee has carried out its
6:01 am
biggest ever bank rescue. the government will spend as up as $19 billion to keen two failed banks. plan calls for so paw low tailed face sets. british prime minister theresa may outlines her plan to e.u. rding the right to citizens living in the u.k. later. last week, e.u. leaders say did he feel didn't go far enough and risks costing people rights. meanwhile, david davis says the government will fight any demand that e.u. court should have power in the u.k. once brexit is final. in the u.s., senate majority mark connell faces defeat over the mcconnell bill. opposition from at least five republican senators, who are demanding big changes to the legislation. to lose more than two republican votes for the bill to pass. global news 24 hours a day, by more than 2700 journalists and analysts in more than 120 countries.
6:02 am
emma chandra, this is bloomberg. day here. to the on italy and the collapse of the two banks there, i looked west texas with a little bit of a bid on west texas, with advancing within, what is it, 8, 9, 10-year bull market. next screen, quickly. you the good market, 10.11, extraordinary quiet within the market. peso with llar mexican peso strength this morning. i'm ine: tom, this is what looking at, european stocks starting the week on the front foot. rebound in equities thanks to nestle. getting some 3.9%. the pound also erasing a gain seems to be -- first of all, finding an agreement with the d.u.p., but also know she will spell out how citizens living in the u.k. brexit.protected in tom: thank you so much. let me do a morning must read weekend expert on
6:03 am
italian banking. juliano let the zeitgeist this weekend on the collapse of these two banks. e eye tail jan scheme is radically different from the one foot in place, only two weeks ago. slap in the face of italian taxpayers. cherry picking the assets it sandpts leaving the bill to the government. it's hard to see how this aid, involve state which the e.u. forebids. thank you and congratulations on your work over the weekend and scale.pe i did a population-adjusted calm out with $103 billion equivalent if this was the united states of america. we heard earlier this is not a big deal for the italian axpayer. do you agree? ferdinando: in terms of size, i
6:04 am
clear that uld be the immediate payment by the $5 rnment would be around billion. that's the subsidy for making acquisition of these two more traveled lenders impact its capital russia scombrow doesn't impact on cost, because obviously there's going to be a restructuring. there are 12 more billion of guarantees which the government because, in place, as we said, as you rightly said, it's taking all the bad out of these banks. that makes it $17 billion in total. is stressing it's $5 billion we should concentrate on, but it's a hell price for a solution which should have been different. remember, there is something berlin, which had been in place in the eurozone for years, which the italian government was determined to avoid. e result of that decision to avoid the berlin of
6:05 am
holdings. tom: your work is a very pan-european work. the germans, the people of the netherlands, how should the united kingdom react to this cramdown? period in ordero: the question asked in berlin and amsterdam is, are these european rules, which are meant to protect taxpayers from bailing out still valid? is there a banking union which are sure that the rules there for everyone to apply? and this matters, because as we needs e eurozone greater integration in order to survive in the long term. at means more resharing, i.e., german taxpayers possibly you know, italian, the italian government, or the other way around. now, if there is no trust in rules, can these steps go with sharing and be taken? that's the really important i think which everyone should focus on today. ferdinando, what are
6:06 am
the chances of a banking union actually being revived? in order -- ferdinando: smaller today. there are some that say once we problems, e legacy the problems there before the new rules were introduced, let's just make sure that all out of the ms are way. remember, italy, after all, really -- the countries spain. many or even once these are out of the way, we can concentrate on getting the future. -- why would we want to take this step? glance, these rules are circumvented, and now it's taxpayers' money. countries' e, other money, will they be so keen to open the purse? om: very good. thank you so much, ferdinando:
6:07 am
view columnist, and, of course, his worked this rate. was first first-rate work is always the province of william lee. group, now at ti the milken institute. are you enjoying the west coast snths a whole different world. william: i actually got a tan out there. without sun. doing?at are the what is the overarching challenge you're trying to do? this is an example of how important it is to get it correct. at we're doing is saying the world is better off if we get capital at the right time. we're having a round neighborly to talk to morrow regulators, practitioners, and academics about how best to perimeter gulatory for the united states. it's really in bad shape. tom: we're coming up on a anniversary of the crisis, third week of august-ish of 2007. now, or is afer this italian bank idea just 2006 to he same from 2008? how am: great example of
6:08 am
regulators can screw things up. they want to get the banking system stronger, but they haven't raised capital levels. in the united states, we've raised capital levels, but now we're saying the united states is different because market. the capital let's extend all the things we did to asset management and everybody else, and that's the orst thing you can do, because asset managers are not banks, and the way you define systemic problems in the capital markets same way you define it in banks. banks is a payment system. them what makes systemic. you lose money, you make money, markets way capital are supposed to work. trying to get re the conversation going in, and try to straighten out where the egulators are going. francine: bill, just on the talian banks, tchublity slee safer today or not? william: i think there's a lot more moral has ard going on, everyone is thinking the government is going to bail things out. what we should have done is allow what the banking system which is to to do, bail in the bond holders and other stakeholders to say, is to get ncentive
6:09 am
your management to do safe banking. safe banking means you don't loans. bad you've got a history of bad loans, and that's and to deal the taxpayer. ve tom: bill lee on too many of, including an update on american -- we're 20 -- what half of year is it, 2017? we're in the first half of 2017 go? find out from bill lee as well. we'll also find out about the american banking system. gerard cassidy of portland, aine, and r.b.c. capital markets, an update on the state f regional and smaller banks in america. that will be good. this is bloomberg. ♪
6:10 am
6:11 am
6:12 am
emma: let's get to the bloomberg business flash. ctivist investor dan loeb is making his biggest ever befment his third point hedge fund has billion stake in nestle and is demanding a note. according to he urged to increase leverage for share buybacks. year nestle sales growth fell to the slowest pace in at least a decade. n't commenting on loeb's stake. it's the biggest corporate ilure in post-war japanese manufacturing. air bag maker tack at ahas filed for bankruptcy protection tokyo.u.s. and the company has million of recalled air bags that have more than a dozen deaths. he filing clears the way for $1.6 billion takeover of takata's assets. billionaire mikhail friedman has agreed to buy one of the largest health food retail chains in europe.
6:13 am
friedman's retail will pay about $2.3 billion for holland and barrett. chain is owned by the private equity firm carlyle group. and that's the bloomberg usiness flash. tom, francine? francine: thank you so much, emma. the u.k. prime minister is with the iscussions democratic unionists, this as she aims to nail down an greement with the northern irish party to ensure her conservative keep, her conservatives keep a grip on power. today, she's also due to give details of her strategy to 3.2 ards the rights of million e.u. nationals living in the u.k. beyond brexit. now we're with simon kennedy, also with us in new york is bill lee of the milken institute. exactly are we going to find snout they're going to page a 15-page we ent saying this is how propose we deal with e.u. nationals living here. simon: the proposal theresa may it didn't go down particularly well with her in the e.u.
6:14 am
they suggested it fell short of what they wanted. away uggested it stripped rights that the e.u. living in britain currently enjoy. and over the weekend, it emerged, no surprise, there's going to be a big fight according to david david over, over the role they post-brexit britain. to oversee ed arguments and britain said that's a red line for them. are ine: we also understanding there's pictures showing media theresa may siping a deal with the d.u.p. she met with the leader there. is it all about money going to ireland? simon: it probably is. there's a good amount of money to belfast in the next few years, no doubt. earlier rrison talking about how they delayed the deal ill now, and this is the money, the need for treasury to monitor that. so perhaps something more
6:15 am
on the brexit plan, we'll have to see what that document says. but certainly gives theresa may some breathing room. she's got votes later in the week on her legislative program. support of the 10 .u.p.'s. tom: i believe the republic of of 32 counties on the island of ireland. what do they want out of this agreement? they want the d.u. pfment to ate with the tories? simon: i think when you look at both islands, the big issue for is in the brexit talks this hard order that's been and so certainly the addition of the d.u.p. to holds ernment vote count theresa my's hand a little on that. e's probably going to have less able to negotiate that, although it's both the e.u. and said the absence of hard border is important for both of them. the back story you
6:16 am
learned last week, within the ageantry of meeting? you're pro. i've seen you work hotels like no one. what did you learn in the halls hotels? simon: i think you can tell went on headlines what last week. obviously the first round of lks between the e.u. and the u.k., and they kicked off with the u.k. -- if it's about it, t the nly the u.k. los first round. they entered the talks with avid davis, the brexit secretary, promising a row of the summer over the schedule of those talks, and immediately now, very for talks much on the schedule, that the e.u. wanted. so certainly first blood for e.u. francine: we're getting u.k. al news from a official that theresa may has reached a governing deal with he northern irish d.u.p. so we're just seeing pictures of the prime minister with the leader of the d.u.p., a couple of minutes ago, when they were signing that deal. o we'll get plenty more on
6:17 am
that. we now need to understand by speaking and calling the exactly what rse, was in the deal. i mean, we're just wait for the deal right now. know anymore. simon: absolutely. t's most likely that the conservative party and the d.u.p. party have similar views both pro things, brexit. his, to some extent, will be a meeting of minds, and a meeting of money that you'll see, as money flows to northern ireland d.u.p. f maintain the support, which as we talked about earlier, is fragile. continue necessarily for a long time. we'll have to see the content of that document. ask the dumb american question. does this save the prime minister's tenure? simon: it certainly helps her out. she's got this big vote wednesday and thursday that she to win, after the queen's speech, the legislative program we spoke of that lier, defeat would be pretty bad for a prime minister. d.u.p., the 10
6:18 am
law makers it brings to the party will guide her through and certainly this rupert report, most likely is that she and through that vote, she's still with us in a week, and she continues to push on or a little while yet. tom: an economic question, we saw a great number today, some good economic cat on out of urope. what have you seen the latest of the united kingdom economic growth? is it better than the gloom? not. perhaps we saw retail number fall the other week. four-year high. certainly there's a case to be is that the euro area solidifying its recovery, just as the u.k. goes the other direction. gives some hand to the e.u. negotiators, lot has been made of the fact that he economy, on the content, is picking hand to the up, that macron brings and that there's
6:19 am
signs of inflation picking up. breaking news, get back to working, head of our brexit coverage. imon ken demee londonful william lee of the milken institute is with us as well. we're going to come back with talk about the american economy, maybe a little bit on england as well. ireland, shed say. important discussion on sterling. stay with us from london. from new york, this is bloomberg. ♪
6:20 am
6:21 am
6:22 am
6:23 am
we with bloomberg news, sources.ur with us now, edward hammond out of the university of sussex, working the m&a desk at bloomberg news in new york. he broke the story here on leer over the sources. with us weekend, which everybody has picked up. this is aing about number, even shares. .3% of here's a hedge fund, worth more than god. i think dan loeb owns everything on long island out past hempstead. great. of money for lot dan loeb. he has to raise than god. money this shot at nestle? that's right. it's actually the position in terms of the size of the shares, relatively small. $265 billion company, nd he's got a $3.5 billion position. he's done gone and done some of this with his own capital. sort of raised the special purpose vehicle just to do this particular thing. is this private equity? i think of the others, and this is a new internal rate of
6:24 am
give money to ou an alternative investment guy like mr. loeb? see more of will these situations, but particularly with a company this big, you need to go in eally high dollar amount to have any leverage at all. so he's done that, and i guess he's er thing here is taking advice from some of the people. of sara ice chairman lee is involved in this, right? >> right. has a guy who knows his coffee business very well in europe. third is advising point, loeb's fund, and also heavily co-invested. how angry of an activist is he? he lked about amazon, and was -- you know, i'm positive on this, i want to be nevolent s. dan loeb benevolent on nestle? u.s.a. he's striking that taupe at the moment. estle has a new c.e.o. loeb's tone right now is we think it's incredible, work with him to engender some of these changes. we want to get the ratio up. we want them divest some stuff.
6:25 am
in ally their stake l'oreal about, a 23% stake, worth somewhere around $23 billion. he's saying you should bring that cash back in, return it to m&a, grow s, or do the business in a sort of nonincremental way, which ey've been critical to doing in the past. francine: did you get a sense he'll go into other food europe?s in or is it just nestle? >> nestle is not only the iggest food company in europe, the biggest in the world. i think this is a pretty strong place for him to start in terms of trying to move into that into the kind of packaged goods space. a ton of stuff that nestle can do. i think he's going to push for the to do moves around world in terms of getting out noncall. 's perhaps whether he uses this more, it will be interesting to see. thus far, the guy who's done kind of food beverages has been nelson. so tell be interesting to see if loeb starts to see some of sort of spotlight from him. francine: ed, thank you so much.
6:26 am
hammond broke the story on nestle and dan loeb. bill lee stays with us, coming "daybreak america," a nversation with alex gorsky, j&j chairman and c.e.o. they'll talk about inflation, some of the pricing they need to do into the emerging markets. that's coming up. 7:30 a.m. in new york. 12:30 p.m. in london. him the things i'll ask is also about divesting, but also m&a. maybe a component going something be they'll shy away from, because of where the dollar is. this is bloomberg. ♪
6:27 am
6:28 am
6:29 am
francine: this is francine and tom from london and new york. first to get to the word. here's emma chandra. emma: in london today, prime minister theresa may has governing deal with
6:30 am
northern ireland's dim i can unionists. support the party's after her conservatives last the majority in parliament. negotiations centered on extra northern ireland and plans. in pakistan, the death toll has risen to 157 in a fuel truck fire. scores of villages have rushed o the scene when the truck crashed. they were collecting the spilled fuel plans. in when the wreck exploded, engulfing people in lames. u.s. secretary of state rex tillerson is criticizing some demands saudi arabia and its allies are making of qatar. tillerson says they would be ry difficult to meet and urged the country to start negotiating. the saudi-led bloc has told to shut down al-jazeera tv network and contact with islamic groups, such appears brotherhood, and remove turkish troops from the country. policymaker ve john williams is making the case to further gradual sydney, ate hikes n. the san francisco fed president said he expects inflation to target next
6:31 am
year, and he said the fed's intention to start reducing its holdings. >> the goal here is really just gradually ease off the kind of stimulus to the growing a p it little bit above trend, but don't let it go too far and try normalization of interest rates help, keep that from going too fast into the ock. emma: some fed officials have argued for a pause in the rate hike campaign to see if heading is actually any higher. global news 24 hours a day, owered by more than 2700 journalists and an liz in more than 120 countries. i'm emma chandra. bloomberg. francine, tom? tom: thanks so much. i put this out on twitter on sunday. this was the clearest short article on the healthcare in washington. steven pearlstein at george mason writing in the ashington post," as he often does, you can't lower healthcare costs or extend some people
6:32 am
without raising the taxes or premiums of everyone else. game. zero sum what we get is a financial shell game. he goes on to say president pedal that o soft redistributive reality in trying to pass obamacare, just g.o.p. are now desperate to cover up that they are doing the same, only in reverse. it's a great article. i'll re-send it out on twitter today. our chief is washington correspondent. kevin, the senator from kentucky, does he have the votes? kevin: the senate majority ader, mitch mcconnell, doesn't have the votes right now, tom, balls the junior enator from kentucky, rand paul, as well as people like senator ted cruz, mike johnson i'm sorry, senator johnson, senator lee, are also opposing this as a result of saying that the bill isn't conserve testify nough. , en you talk to moderates including senator kevin heller,
6:33 am
2018, who flexion feel this bill is too far to the right. watch all of this go on as, of we're awaiting the nonpartisan congressional but office score. we could get that today or tomorrow. that's right where he wanted to do. to me, dean hell certificate ost interesting senator from nevada. heller is the most interesting senator from nevada. what does senator heller, desperate to get re-elected, what does he need from the congressional budget office? kevin: you can't be kicking people off healthcare. that number, coming from the like we saw in the house, it's like political deja vu all over again, look for watch for ler to that. but also, i can tell you that i spoke with a source over the weekend, a political source who talking to the white house, who told me essentially that for senator heller, it's either white board with the house or just move over. because, of course, they feel an lot of ould political threer to say the least in terms of where this debate is headed. leader is majority not going to bring a vote to this unless he feels he has the votes by the end of the week. doesn't, then you're
6:34 am
going to have to see what we did in the house, which is back o the drawing board, so to speak, to recraft this piece of legislation. ancine: kevin, what is the president's political capital like? if he calls one of these switch sides? ey kevin: i don't think it's a matter of the president having litical capital on healthcare, as a matter of the republican party desperately pass some type of healthcare reform, because they promised it for eight years. er since obamacare was passed, they've been saying they were going to repeal it, fix it, do something to it, and it, hey have to do especially if the fate of the majority in the senate in hanging in the balance, quite literally, for the 2018 midterms. tom: kevin, thank you so much, our chief washington correspondent. nd now joining us with perspective further, we have william lee of the milken jon lieber d also with us to talk about the u.s. politics. john, let me start with you go to dr. lee.
6:35 am
with the healthcare legislation, there's got to be here in the debate. what did you study over the weekend? what is your morning research from your group say about cconnell care? john: right now, they're keep moderates. i think if you look at the content of this bill, this is the most conservative entitle that's ever had a chance of passing into law. ted cruz knows that. mike lee knows that. think those guys ultimately end up being comfort national voting for this bill. members like dean heller, lisa some of the moderate members who are at risk because of the medicaid cuts are not that are far more interesting. tom: in the wonderful op-ed, they talked about the structure needed. remind us how big healthcare is in the united states. 17%? up to william: exactly. important component. the c.b.o. is great at but number evenues,
6:36 am
of people covered. they thought four million were going to be recovered by less than half was actually covered. when we talk about economists forecast, the c.b.o. screws up its forecast. ot taking into account the people who actually want to would i the insurance that they want rather than pay to avoid buy the government shares that they don't want. i think that line is something we need to understand better, to reform healthcare means you got to give people what they want. you got to give insurance mpanies the opportunity to sell. you can't have them not selling across state lines the way we o now. so many insurance companies are pulling out of states, because they said we can't make it here. insurance companies are not allowed to come in. tom: over to the d.u.p. story? francine: we're seeing live pictures of arlene foster, leader of the d.u.p., talking 10 downing er street. is is a so-called confidence and supply and it caps 17 days of discussions after the nserve stives unexpectedly
6:37 am
lost their parliament majority in this month's snap election. foster saying the deal includes 2% nato commitment for he moment. she hasn't talked about the bothered. she's saying the deal aims to brecks thought benefits all, and she believes that the deal includes no change to the pension triple oss. it does seem for the moment, is that it's focused on domestic issues for northern ireland. go back to washington, as we spin around on a busy monday with our stories. lieber with us. jon, within washington, there's sandration to get to tax reform. if senator mcconnell doesn't get his vote, do they just automatically jump to tax eform? jon: no, i don't see how you just abandon this and go on to reform, even if you did to want put this behind you. i think you need to include healthcare s of reform in whatever the tax bill is you eventually do. the next big hurdle for these is going to be passing an
6:38 am
fy-18 budget, which will set up tax rocess for doing reform. and that budget, if they don't succeed here in healthcare, is ing to have to include elements of healthcare. recess, when ig this go home on their recess, what are they going to hear? going to hear from both sides, conservative activists. hey campaigned for seven years on repealing obamacare, and they failed to do that. and they're going to hear from lot of liberal and progressive activists who are going to show up at their town halls, mount protests and let support they don't the bill they're trying to push. it's going to be a really tough environment. tom: thank you so much for in today. jon lieber, you and i are going to have a beverage of our hotel bar he trump there in washington, so i can get a real taste of washington. jon lieber, thank you so much. with bill lee. we're spinning around today with the news flow, and yet all dampened. are is chair yellen orchestrating this news flow? governor carney
6:39 am
orchestrating everything? puppets? he my sister had the puppet with the strings down in the asement. william: right now, what's bothering carney the most is the do we do about inflation? why is it the economy is doing more surprised here in the united states? where is the inflation? we get john williams to say inflation is nowhere to be found? the reason why is because the has to n of the markets be taken care of, and we have to normal rates. we have to norm a.m. rates we got to restore the financial markets to their proper functioning. you have the source, which is ex-torgs of people raiding companies and taking giving it back to shareholders. tom: fran cry? still getting breaking news from 10 downing reet with the d.u.p. leader, arlene foster, still talking about some of the agreements prop up the d to
6:40 am
conservative government party of theresa may. o this is why theresa may kept her grip on power, by reaching this deal, in terms behalf we know so far. arlene foster saying that they will aim to support a brexit that benefits all. we have the deal, and i believe that is the car where driving ter is now off outside downing street. this is bloomberg. ♪
6:41 am
6:42 am
emma: let's get to the bloomberg business flash. u.b.s. bank excluded as an underwriter of its recent $9 billion rights issue. to the n, according "financial times," deutsche bank learned that u.b.s. was trying to use the german to r's financial issues hire away senior bankers.
6:43 am
there's no comment from either f the banks. rio tint 10 backing yancoal for lia's improved offer its assets. they raised the bid to almost $2.7 billion in an attempt to a challenge by glencore. rio tinto says it prefers the somecoal offer because a greater certainty the deal will be approved. and that's the bloomberg usiness flash. tom, francine? tom: emma, thank you so much. one of the th great american success stories, b.m.w. of germany thought about building a plant n america. 25 years ago, already. our matthew miller has flown to spartanburg, south carolina, to get a b.m.w. check on 200-some miles from greer to charleston, where they export all this stuff. this is an export in growing
6:44 am
juggernaut. since 1992 or 1994. 2 gets bigger and bigger and igger, doesn't it? matt: absolutely. a lot of people don't know, but hey manufacturer, b.m.w. manufacturers all of the global x series cars here. x-3, rything from an x-1, x-4, to an x-6, even the x-7 up, to 450 units a year. they export $10 billion worth out of here, tom, every year, more than any car manufacturer in america. to the cars that go charleston to get shipped on boats, wherever they go in the mr. trump doesn't support this manufacturing versus so-called american manufacturing? matt: yeah, that's one of the i'm going ask the c.e.o. when i talk to him a little bit later this morning. ey're having the 25-year celebration here. they're introducing a new model, the x-3, the third generation of that as well. to he main thing i want
6:45 am
know is, how have your discussions gone with president trump, and have you convinced you have so many jobs down here, 9,000, and create so economic growth with this xport miracle, really, since 1992, have you convinced him it's not necessarily a bad thing to have b.m.w. producing in the u.s.? francine: matt, i guess it's all about jobs, right? 9,000 e saying, 9,000, jobs they create. is there any indication that maybe to please president trump, will create even more jobs? can you sorry, fran, repeat the question? francine: the question is ether there's a sense that b.m.w. will create more jobs to lease the president? matt: well, we'll see what they ome up with today. there's going to be a few announcements. senator oing to have lindsey graham here, as well as the governor. a lot of state officials, a lot f government representatives
6:46 am
down here to talk i guess urther with b.m.w. executives, and we'll see what kind of news they come out with. there's a press conference heduled for a few hours from now. tom: i'm going guess spartanburg, south carolina, is trump country. they probably voted 140% for the president. there, m.w. employees do they support the president? b.m.w. l, you know, representatives went with angela merkel to the white harald kruger, with whom i'm going speak later today. they haven't come out for or but they are definitely for free trade, and that's one of the contentious between the president of this company and the country, the government of germany as well. miller, thank you so much. look for his interview later b.m.w. th william lee with us from the milken institute. this is a whole new thing at citi tten about group, which is it's not black and white. the president is doing a black , everybody alysis
6:47 am
is melded in. william: the president says we jobs in the u.s. this is what b.m.w. is showing, we have the advantage, if you the right technology and management. b.m.w. put together that right years tion 20 some odd ago, and that's a great success story. it shows you where the future trade policy is going to be. company-based, central-based trade policies that incentivize good management, good echnology, and the right combination of american technology and american labor. kind of trade policy that we want to see. let's face it, nowhere in the do you see free trade. we want to change sources in a way to incentivize companies to b.m.w. did 20 ome odd years ago. tom: the thing about it that's fascinating, i believe this is dream that would they would want. they want mercedes and honda to do this, etc. exactly. and what has stopped it? the fact there are other ountries that incentivize more
6:48 am
companies to go there, whether it's china or mexico or canada. to straighten out the incentives to get more u.s. production. world of distorted trade, you cannot say that tting on a tariff or trade barrier is bad, because you have to see what the overall picture does, and the overall matters ght now that is american employment. very good. bill lee with us this morning as we talk about spartanburg, have e good matt mill her his interview later. live, get h tv charts. down here is francine corner. hate mail, me francine only accepts love letters. you can to this down and here us. to stay with us. we're live in london and new york. bloomberg. ♪
6:49 am
6:50 am
6:51 am
francine: tom, we heard a earlier on from theresa may, but also d.u.p. deal. foster he u.k. prime minister did
6:52 am
resume discussions, which ended up in the u.k. governing party, having a deal with northern airland's d.u.p. far.is what we know so so they were talking, of course, about resume discussions, which the n brexit that benefits all. understand the d.u.p. said they will work with the did he have lution of corporate tax. they're asking for more local at the same time, money to go into their region. we also understand the d.u.p. downing street to have a direct line for negotiations. but this is significant, 17 days of es cap discussions, and it's leading agreement. it was crucial, of course, that theresa may had this before her a vote eech goes to later on this week. now, coming up shortly, it's daybreak americas with david and alix steel. know you have great interviews coming up today. david: we do. that's pretty big news. like you're going to have a government in london after all. this is healthcare week. they're ublicans say
6:53 am
going to get a bill, taken care of before recess comes up. we're joined by the man who a company at the center of it, alex gorsky. we're going to talk about the bill, about tax reform, and also talk about his company, where it's going. biggest completed the transaction of their lives, $30 billion. om, you know where it was? it was in switzerland. thank you so tin, much. our single best chart. i went long on this just to lee awake on early monday morning. slope matters, bill lee. migration down to 1.2%. a new series here. we're not migrating. on bloomberg radio, and i'll t this out on twitter, the basic idea that we're adjusting down. 3%?we dampening away from william: it's always the case the initial estimates are based feelings, right? tom: and now hard data. not matching 's
6:54 am
it. that's what we've been saying. soft data to on drive policy. the fed cannot believe we're going to get growth and in the numbers. of hires ve a chart versus job openings. william: the phillips curve has the busted because unemployment rate is hitting the slide. i fond a better slide that form of hiring. everyone says there's a lot of job openings out there. nonsense. we have a lousy hiring market, because no one wants to hire. everyone is shopping. upgrade the labor force, and no one wants to pay it, except in specializing like housing and specialized skills, where there really are microshortages. exactly what you're seeing, relative wage increases, but not absolute wage increases. inflation is all about. francine: do you believe the next inflation won't really does it mean the fed estimate in rising rates now is wrong? right, the fed is
6:55 am
because they are having a gradual increase in inflation, up to 2% over the next two years. that's exactly the kind of pace rise ooking at, gradual in inflation. the fact that market expectations are coming down also shows thaw they've gone overboard in looking at that one lousy number, 4.3% am hat's the wrong number to look at. the number to look at is how much are you hiring people, and wages? do you pay up you're not hiring. you're not paying up wages. tom: let's look at the central derby. what kind of chairman should mr. trump appoint? william: one of the great sprobts fed is unanchored. we don't know what principles guided. the principles guiding your assessment of the data? i think we need a more policy. ed a very good friend of mine, we ed to eat sushi on k street, he's going to be a great addition to the board. i think we need more like him. om: marvin, a guy from richmond, eats sushi? i didn't know he was that sensitive. i learned something today from lee.
6:56 am
marvin, good friend of sushi. william lee of milken, thank you so much. appreciate it, with terrific news flow. major shout out to ed hammond the first news, time he's gotten up before 9:00 a.m. in like five years, and ferdinando, who came out of a bank of italy meeting hours ago to speak to us on crisis. an banking let me go foreign exchange report right now. mexican peso stronger, well under 18 as well. also the yen, 111. it's a great start to the week. stay with us through the week. this is bloomberg. ♪
6:57 am
6:58 am
6:59 am
alix: a big sigh of relief. ime minister theresa may
7:00 am
strikes a deal with northern ireland's democratic union and keeps her grip on power. bailout, italy bails out two failing banks for $19 the n, as taxpayers foot bill. one big question. markets wait for the c.b.o. bill, on the healthcare as republicans defect. david: welcome to daybreak on his monday, june 26. jonathan farrell is off today. u're getting it started, alix. alix: monday morning feels busy but not a lot of price action. .2%.utures up by sterling getting a boost after the news that the u.k. prime keep that minority in government. and the 10-year yield, yields one basis point, and crude up .3%. for your s time morning brief at 8:30 eastern time. we're going to get durable of s orders for the month may. around 1:00 this afternoon, european central bank president federal ghi and former reserve chair ben be

36 Views

info Stream Only

Uploaded by TV Archive on